China Outlook
Q: What's your base case view on China?
A: Q4 China orders were down mid-single digits, following low double-digit growth in Q4 2022. On a two-year stack, they saw high single-digit momentum. The environment in China is improving, with teams energized to leverage technology into growth areas.

Margin Expansion Amid Weak Volumes
Q: Can you expand margins if volumes weaken?
A: Despite lower growth, we're generating strong margins driven by I2V, pricing actions, and aftermarket growth. We've taken proactive restructuring to protect the P&L and ensure solid margin improvement.

Q1 Orders and Asia Headwinds
Q: Are orders expected to be down in Q1 due to Asia?
A: We don't guide on orders but expect Q1 orders to be up sequentially from Q4. Typically, we book above 1.0 book-to-bill in the first half due to larger projects.

M&A Market Opening Up
Q: Is the M&A market opening up, especially for large deals?
A: Yes, M&A activity is increasing. We have 10 LOIs, similar to past bolt-ons, and still have deals over $1 billion in the funnel. We remain disciplined, having walked away from a $1 billion deal.

Life Sciences Recovery
Q: Do you expect Life Sciences to return to growth in 2024?
A: Life Sciences is 25%-30% of PST. We expect it to return to normal growth in the second half of 2024.

Lessons from Acquisitions
Q: Any lessons from acquisitions that missed expectations?
A: Some underperformers lacked early IRX integration. We've enhanced our playbook to ensure integration from day one. We monitor M&As closely to address issues promptly.

Backlog Normalization
Q: Will backlog levels normalize over time?
A: Backlog remains high. With a book-to-bill of ~1.0, we expect backlogs to stay above historical levels. There's a structural shift with more longer-cycle projects.

Manufacturing Efficiency Post-COVID
Q: Is manufacturing efficiency back to pre-COVID levels?
A: Not yet. Ongoing supply chain disruptions cause factory inefficiencies. We're continuously improving operations but haven't returned to pre-COVID stability.

Market Assumptions
Q: What are your assumptions on the broader environment?
A: Americas show better momentum; Europe is stable; Middle East and India are strong, especially India. Asia Pacific faces headwinds due to tough comps, particularly China.

Demand Generation Upside
Q: Is there upside from demand generation in guidance?
A: Yes, potential upside exists. Demand generation is part of our healthy backlog and growth plans. Upside opportunities may increase as the year progresses.

Price-Cost Expectations
Q: What's the price-cost outlook, especially in ITS?
A: Expect ~2% price for the full year. We anticipate being dollar and margin positive each quarter in 2024.

M&A Revenue Contribution
Q: Clarify the incremental 400-500 bps M&A contribution
A: The $160 million in guidance is from completed deals. The 400-500 bps refers to expected acquisitions in the year and their annualized revenue.

Working Capital in 2024
Q: How are you managing working capital for 2024?
A: We see opportunities to improve. Inventory levels are still elevated. Focused on collections and integrating bolt-on M&As into shared services to enhance working capital.

Earnings Phasing and Margins
Q: Is the earnings phasing similar to last year?
A: Yes, phasing is consistent with 2023. Incremental margins of 35%-40% are expected, driven by I2V, price, aftermarket growth, M&A improvements, restructuring, and reduced corporate costs.

EV Truck Order Potential
Q: Can the EV truck order return?
A: Prospects are improving. The customer faced bankruptcy issues but assets have been acquired, and we're in discussions.

Air Treatment Benefits
Q: Update on air treatment acquisitions benefits
A: Exciting additions like SPX Flow, Oxywise, and Friulair enhance our portfolio. Air treatment has a 70% attachment rate to compressors and is 50% of aftermarket, driving growth.

Growth Drivers
Q: Are short-cycle products supporting growth?
A: Seeing better momentum in shorter to medium cycle products as PMIs improve. Industrial short-cycle is up mid-single digits year-over-year and sequentially.

European Compressor Orders Strength
Q: What's driving strong European compressor orders?
A: High energy prices are the most important factor, followed by Scope 1 emission targets.

Regulatory Impact
Q: Any regulatory changes impacting your business?
A: No significant new changes. Aware of energy efficiency and refrigeration standards, viewed positively.

Life Sciences Demand Generation
Q: Has demand generation helped in Life Sciences?
A: Yes, it's helping us reach fragmented customers efficiently. We provide solutions in energy efficiency, water efficiency, and digitalization. We expect a return to normal growth.

ITS Margin Improvement
Q: What's behind ITS margin improvement in Q4?
A: Margins increased to 30% from 28.8% in Q3. Driven by higher volumes, productivity measures like I2V, positive price-cost, and strong aftermarket momentum.

PST Life Sciences Percentage
Q: What percent of PST is Life Sciences?
A: Life Sciences is 25%-30% of PST.